Addressing Tax Risks Involving Bank Losses

This book provides an overview of the tax treatment of banks’ tax losses losses in 17 OECD countries; describes the tax risks that arise in relation to these losses; outlines the incentives that give rise to these risks, and describes how these risks can be reduced.

The financial and economic crisis had a devastating impact on bank profits, with loss-making banks reporting global commercial losses of around USD 400 billion in 2008. This level of commercial losses has brought tax risks for both banks and revenue bodies. These risks affect banks’ profits, their capital base, and their level of certainty. For revenue bodies, the concern is that aggressive tax planning involving losses will further reduce already depleted tax revenues as a result of the crisis.

This comprehensive report:
• Sets the market context for bank losses and provides an overview of the tax treatment of such losses in 17 OECD countries;
• Describes the tax risks that arise in relation to bank losses from the perspective of both banks and revenue bodies;
• Outlines the incentives that give rise to those risks, including incentives related to the regulatory capital treatment of accumulated tax losses accounted for as deferred tax assets;
• Describes the tools revenue bodies have to manage these potential compliance risks; and
• It concludes with recommendations for revenue bodies and for banks on how risks involving bank losses can best be managed and reduced.

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